Be a founding member - equity for deliverables?

sarahguerrero·Jul 20, 2022

Posted in:Advice

A good friend has started a SaaS company - I'm really excited about what she's doing and the vertical she's in, and have done some work for her already (and have done a lot of masterminding with her - my background is customer research & marketing).

We'll be talking about me formally becoming a founding member and receiving equity in exchange for deliverables. At this point, she and her co-founder will not be seeking outside investors, and will grow organically.

I've spent four years at an early stage startup and loved it, and know I want to continue in this world (and start my own company soon). I know very little about equity, but I'm excited at the opportunity to get an inside look at growing a startup.

I'd love your best resources for learning more about this kind of equity, structuring deals like this, and just any other thoughts or advice you might have for me at this point!

MaggieRuvoldt·Jul 20, 2022

There are so many ways you can go on this topic. And some of it depends on your current knowledge base - which you said is very little. Here are some thoughts. Happy to answer additional questions.How well do you know how a cap table is structured in general? If not very well, I would approach it as if you were the founder building the cap table Hub spot has an article on this https://blog.hubspot.com/sales/cap-table, and YCombinator has a video that might help. https://www.ycombinator.com/library/9j-how-much-equity-should-i-give-my-first-employees Their library has much more. CooleyGo also as a good article https://www.cooleygo.com/how-to-allocate-stock-to-founders-early-team-members/If that's too basic here's something on how founders think about vesting schedules: https://www.cooleygo.com/founder-basics-founders-stock.Questions I would be asking:1) What is the percentage of the cap table? And the current valuation of the company? Even early, some people assume the company is worth $10k. Before they give out equity, they have to be thinking of some kind of valuation number and strike price. That helps your measure the growth for you over time.2) What's the vesting schedule including if you leave or no longer perform services (stay to play)3) How it is structured for dilution for when they do go for funding?4) In all likelihood, these are options, good to confirm that. 5) Is there a preference stack at this point? More on preference stock here https://angel.co/blog/liquidation-preference-your-equity-could-be-worth-millions-or-nothingCarta also has a nice article on this. Might be beyond where this start up is, but will help you get smart about it. https://carta.com/blog/value-equity-offer-startup-equity-calculator/Hope that helps!

sarahguerrero·Jul 20, 2022

This is SO helpful, thank you so much!